There are many different factors that affect the housing market. Those in the market to buy or sell a house should be aware of these because they might provide some clues as to what the housing market will do and allow them to plan accordingly. These factors include many different facets, including the following:
Employment rates affect the housing market. When people do not have jobs, they are less likely to be looking to buy a more expensive new home. Furthermore, some people might have to move down to a lower job because they cannot make their mortgage payments. When the job market is doing very well and people are moving up, then they might buy more.
The economy affects the housing market in myriad ways, according to Better Homes. When the economy is doing well and people have extra money then they might choose to make the move to a new, bigger or better house. They might have more money to spend, and be spending it. The prices on home may go up. When the economy is doing very poorly, then people might not have the money to spend on homes and might stay where they are or even move down. Sellers might have to lower their prices in order to get a sale. Once one house’s price lowers, then other houses in the area might go down too. For a time, this could lead to a price spiral that causes other asset prices to decline.
Supply and demand
The housing market differs greatly depending on the area in which you are in, even during the same time and economy. One thing that influences this is supply and demand. When there is more supply than demand, the prices go down as sellers compete against each other in order to attract the buyers. They might keep lowering and lowering them to try to get the buyers to bite. If instead, the demand is greater than the supply, the sellers can ask premium prices. In some cases you might even have potential buyers bidding against each other for homes. People will pay exorbitant prices because they are afraid that they will lose out on the property to someone else.
There are many factors that influence supply and demand. Sometimes, there is overbuilding during a time when the economy is good and then when it goes down there is too much supply. Also, some areas might literally run out of room for new buildings such as a place that borders the ocean. In this case, buyers will have to settle for what is available.
Interest rates also affect the housing market. With lower interest rates, people can afford to buy more homes and will be stimulated to buy more. When the interest rates are higher, then they will not be able to buy as much and might have to hold off.
There are many different factors that affect the housing market. Those who are interested in buying or selling a house should do careful research so they can manage the timing and get the best deal.